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Spirax-Sarco pre-tax profit growth offset by forex effect

Spirax-Sarco Engineering saw its first half growth in revenues and profits hit by strong currency headwinds.

At the statutory level the company's revenue fell 4% to £319.2m, pre-tax profit fell 3% to £63.5m and earnings per share flat at 58.7p.

The London-listed company, however, registered a 4% overall growth in revenue at constant exchange rates, almost 12% equivalent growth in profits and 14% in earnings per share.

But those figures failed to meet the analysts' expectations, which, according to Thomson Reuters, were of a pre-tax profit of £67m and revenue of £321m.

Chief executive Nick Anderson said: "Organic sales were ahead in all segments, however there was a strong currency headwind in the period that reduced sales on translation by 7.6% when compared with first half 2013 average exchange rates."

The steam specialties business grew organic sales 3% with strongest growth of 5% in the Americas, including gains in both North America and Latin America.

Organic sales rose by 3% in Europe, Middle East and Africa spread over several countries, with Asia Pacific sales up 1%.

Looking forward, Anderson pointed to industrial production growth rates marginally picking up pace in the fourth quarter of last year and remaining stable through the first half of 2014, although Spirax's markets typically lag the economic cycle by a few quarters.

He said management anticipated that its markets will remain challenging but the company has a larger backlog than in the comparable period of 2013.

Investec Securities analyst Michael Blogg said: "Spirax has shown its ability to roll with the punches and some of its niches have been stronger.

"Overall, the backdrop has improved in the last 12 months and we see no reason to change our profit estimates - although revenue estimates will fall and margins increase."

The company' shares registered a 2.8% increase to 2,767p at 10:25 on Thursday.

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